Principal is Stealing My Money

My 401k is with Principal Financial Group. My personal investments are with Vanguard. Almost all of the funds that I have access to in my Principal account have very high expense ratios. This is the percentage, when all is said and done, that is effectively subtracted from the total return to pay the fund’s expenses, e.g. management fees. It’s part of how the fund management company makes their money.

Almost all of the funds offered by Principal have expense ratios near or above 1.0%. Contrast that with Vanguard, where almost all of the expense ratios are significantly less than 1.0%, many significantly less than 0.5%.

My money at Principal is in a fund that has an expense ratio of 0.31% (the lowest I could find). That might sound good, and it is compared to their other funds. But it’s an index fund that tracks the S&P 500 Index, which means it’s relatively inexpensive to manage anyway. The equivalent fund at Vanguard has an expense ratio of only 0.18%.

But I haven’t even gotten to the best part. Since this is an index fund, it invests in a basket of stocks. Many, probably most, of those stocks pay dividends. But I can’t find any evidence that Principal ever pays me those dividends. So on top of charging me high expenses (high for an index fund), they also seem to be skimming off the dividends for themselves!

But try to find that information on their web site. Did I mention their web site is horrible? Vanguard clearly describes the fees and expenses associated with their funds. It’s easy to find, and easy to find the detailed prospectus for each fund as well, just click on a fund name and then on the ‘Prospectus’ link. But Principal? I was finally able to find the expense ratios, but a prospectus? Forget it. I still haven’t managed to find those on their web site.

So, to my mind, Principal is "stealing" money that should be going to me, both via their relatively high expense ratios, and by pocketing the dividends that the stocks in the index fund are distributing.